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7 When Should You Consider Settlement DOL Investigation Two years of back pay Usually no liquidated damages Current and former employees addressed Usually no civil penalties Can leverage prior success Avoids a public judgment Cooperation = more favorable results 7

9 When Should You Consider Settlement Internal Audit Former employee problem Being proactive has benefits May not be able to satisfy the bona fide dispute requirement Private settlement issues, but can still seek DOL supervision or Court approval 9

10 When Should You Consider Settlement During litigation Before or after discovery Collective or class certification Dispositive motion 10

22 Initial Assessment: Evaluating the Complaint The Basics Jurisdiction, Judge, & Plaintiff s Counsel Plaintiff What do you know about him / her? The Law FLSA Claim / State Law Claim / Hybrid Merits State A Claim? Exemption? Off-the-Clock? Meal Break? Overtime Calculation? Factual Grounds Are the stated facts sufficient to support the merits claims? Collective / Class Action Allegations Too vague to survive? Too broad? Can it be limited to a facility, a state, or a region? Or is it national in scope? 2014 Seyfarth Shaw LLP 22

23 Preliminary Exposure Analysis Rough analysis. Not intended to be perfect and detailed Key Factors Statutes of limitations Misclassification or off-the-clock case Number of workweeks / people at issue Number of hours at issue Rate(s) of pay 2014 Seyfarth Shaw LLP 23

25 Preliminary Exposure Analysis: Type of Case FLSA Misclassification Half-time, using fluctuating hours to determine regular rate (majority of courts use this method) Time and a half for hours over 40, using 40 as the divisor to determine regular rate (minority view) Off-the-clock: Time and a half for hours over 40 Other: Sometimes the time of time and a half has already been paid 2014 Seyfarth Shaw LLP 25

26 Preliminary Exposure Analysis: Number of Workweeks / People at Issue Number of workweeks at issue provides the more accurate estimateof exposure Number of people provides a less accurate estimate, but can be discounted based on tenure averages Each will over-estimate unless discounted for weeks when no overtime would be worked USDOL, Wage and Hour Division, uses 40 weeks out of a 52-week year (or approximately 77%) In FLSA cases, opt-in participation rates vary 2014 Seyfarth Shaw LLP 26

27 Preliminary Exposure Analysis: Number of Overtime Hours at Issue and Employee Rates of Pay Number of Hours at Issue Early Stage: Use 2.5, 5, 10, 15 overtime hours, unless more exact estimate is available Later Stages: Determine more accurate estimates derived from data points and discovery Employees Rates of Pay Averages are okay Actual is better 2014 Seyfarth Shaw LLP 27

29 Exposure Analysis As case progresses, exposure analysis can be refined based on actual numbers Opt-ins Rates of pay Workweeks During settlement discussions, calculators can be used to implement different variables to address disagreements among the parties Seyfarth Shaw LLP 29

32 Items to Consider in FLSA Settlements Consider tax consequences earlier in the process, rather than at the conclusion. Detail the allocation of funds Reasonable allocation should be accepted by IRS Remember that the IRS is not bound by your decision Payroll and self-employment tax considerations When were back wages earned Treatment of attorneys fees Reporting damage awards Reporting payments to attorneys 2014 Seyfarth Shaw LLP 32

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